Question 1

In a perfectly competitive market, the price at which a firm sells its product is determined by:

Accepted Answer

the intersection of market demand and market supply

Question 2

A firm in a perfectly competitive market will maximize profit by producing the quantity at which:

Accepted Answer

$$MR = MC$$

Question 3

If a perfectly competitive firm faces a market price below its average variable cost at all output levels, the firm should:

Accepted Answer

shut down immediately

Question 4

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Products are differentiated

Question 5

Suppose a firm’s total cost function is $$TC = 100 + 5Q + Q^2$. If the market price is P = 25$, what is the profit-maximizing output?

Accepted Answer

$$Q = 20$$

Question 6

A monopoly differs from perfect competition in that:

Accepted Answer

it can set the price above marginal cost

Question 7

If a monopolist can perfectly price discriminate, then:

Accepted Answer

deadweight loss is eliminated

Question 8

Which of the following best describes the concept of marginal cost?

Accepted Answer

The cost of producing one more unit of output

Question 9

In the short run, if a firm’s average total cost is greater than the market price, but its average variable cost is less than the market price, the firm should:

Accepted Answer

continue to produce in the short run

Question 10

Which of the following is an example of a barrier to entry in a monopoly?

Accepted Answer

Patents and copyrights

Question 11

If a firm in a perfectly competitive market is producing where $$MR \u003e MC$$, it should:

Accepted Answer

increase output to increase profit

Question 12

Which of the following is true about the long-run equilibrium in perfect competition?

Accepted Answer

$$P = MC = ATC$$

Question 13

A natural monopoly occurs when:

Accepted Answer

one firm can supply the entire market at a lower cost than two or more firms

Question 14

If the government imposes a binding price ceiling below the equilibrium price, the likely result is:

Accepted Answer

a shortage

Question 15

Suppose the demand for a product is given by $$Q_D = 100 - 2P$$ and the supply is $$Q_S = 4P. $$What is the equilibrium price?

Accepted Answer

$$P = 20$$

Question 16

Which of the following is an example of price discrimination?

Accepted Answer

A movie theater charging different prices for adults and children

Question 17

If a country imposes a tariff on imported goods, the domestic price will:

Accepted Answer

increase

Question 18

The prisoners’ dilemma game illustrates that:

Accepted Answer

individually rational behavior can lead to a collectively inefficient outcome

Question 19

Which of the following is a likely result of a quota that limits imports below the free market equilibrium?

Accepted Answer

Domestic producers gain, consumers lose

Question 20

If the marginal cost of producing a good is constant at $$MC = 10$$ and the market price is $$P = 15$$, what is the profit-maximizing output for a perfectly competitive firm?

Accepted Answer

Produce where $$P = MC$$, so any output where $$MC = 10$$

Microeconomics Final Exam Practice: Key Concepts and Applications

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